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In 2023, HealthLeaders has labeled it the “year of reducing denials for the revenue cycle,” and recent studies underline the growing concern of denials among revenue cycle professionals. Of particular concern are prior authorization denials, which have seen a significant uptick.

According to the Crowe RCA benchmarking analysis, denials accounted for 11% of all claims in 2022, marking an 8% increase from the previous year. This translates to 110,000 unpaid claims for an average-sized health system. Prior authorization denials are at the core of this issue, driving up denial costs substantially.

In August 2022, prior authorization denials for inpatient accounts led to a 67% increase in denial costs, rising to 2.5% of gross revenue, up from 1.5% in January 2021.

These denials are especially problematic for healthcare providers, as they imply that the care provided was unnecessary, requiring a lengthy and costly appeal process. Even after an appeal, there is no guarantee of reimbursement.

The primary reasons behind this surge in prior authorization denials are:

1- Insufficient Data Analytics (62%): Healthcare systems struggle to gather and analyze the necessary data for identifying submission issues.

2- Lack of Automation in Claims/Denials Process (61%): Manual handling of claims and denials leads to errors and inefficiencies.

3- Lack of Thorough Training (46%): Inadequate staff training and a lack of in-house expertise result in suboptimal claims processing.

To address this issue effectively, healthcare organizations should consider the following steps:

1- Invest in Data Analytics: Utilize advanced data analytics tools to identify patterns and submission issues, allowing for targeted strategies to prevent prior authorization denials.

2. Automate the Process: Implement automated workflows to reduce errors and improve efficiency in claims and denials management.

3. Prioritize Staff Training: Regular training sessions keep your team up to date with industry changes and regulations, enhancing their skills for effective denials management.

4. Develop In-House Expertise: Cultivate in-house expertise in revenue cycle management to navigate complex billing and reimbursement procedures efficiently.

The rise of prior authorization denials is a significant challenge for revenue cycle professionals. By investing in data analytics, automation, staff training, and in-house expertise, healthcare organizations can address this issue and ensure financial stability in the evolving healthcare industry. Contact SAMCI to figure out what works best.